Three Key Industry Challenges To Growing Demand

The beef industry has long understood that from a demand standpoint the mission is quite simple. We need to increase the number of customers, increase the average value of a typical

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The beef industry has long understood that from a demand standpoint the mission is quite simple. We need to increase the number of customers, increase the average value of a typical transaction, and increase the frequency of beef purchases.

Increase the number of customers. Population growth has helped us by default, and regaining access to foreign markets has and will continue to be a priority. All one has to say is “China” for one to get excited about the export prospects about beef demand.

In other areas, the industry, while maybe not increasing the number of customers within various demographic groups, has done a very good job of stopping the erosion. Aging baby boomers, a younger generation that has grown up with a preference to chicken, changing ethnic mixes and a whole host of other factors have made this task a key priority.

In addition to new beef cuts, new products and new marketing outlets, the branded and HRI revolution has resulted in far more differentiation in our product offerings. This allows us to better target specific groups with the aim of ultimately increasing market penetration within various segments. There remains tremendous opportunity in this area.

Increasing the average value of a typical transaction. Convenience and nutrition advances, coupled with brand equity and product differentiation, have helped in moving the industry forward in this regard. The new cuts and various efforts to increase the value of the round and chuck have been quite successful.

And this has become increasingly important. With rising input costs, the need to increase transaction value is needed just to keep pace with inflation. Management and genetics have come a long ways in improving both the quality and consistency of the eating experience we deliver, but the opportunities in this area remain large.

Increase the frequency of beef purchases. This number is easily measured by evaluating per-capita beef consumption. Rising beef prices and falling disposable income is expected to drive this number significantly lower. It is this number that will indicate whether we are in for a couple of years of tougher times or whether we can actually expand the size of our industry.

Compared to other industries, our segmented approach and the number of margin operators in between the fixed-cost producers (cow-calf) and the consumer has made it difficult to address these concerns. The beef checkoff allowed the industry to address this and reverse 25 years of falling beef demand, but inflation has taken its toll on the effectiveness of the checkoff program.

There is no shortage of plans or tactics to drive the three tactics above. The sad fact is that there’s simply a shortage of dollars to implement them. If the industry is serious about realizing the potential and prosperity that awaits it, it’s time for us to increase the funding for demand-building activities that will make it happen.